RNS Number:9545E
Electra Kingsway VCT 2 PLC
21 June 2006
Electra Kingsway VCT 2 Plc
Interim Results for the six months ended 31 March 2006
Financial Highlights
(unaudited)
Six months ended 31 March 2006 2005
(restated)
Net assets #34.4m #14.7m
Net asset value per ordinary share 100.70p 94.67p
An interim dividend of 1p per ordinary share will be paid on 4 August 2006 to
shareholders on the Company's Register of Members at close of business on 7 July
2006.
A copy of the Chairman's Statement and Preliminary Announcement are attached.
For further information:
Nick Ross, Electra Kingsway VCT 2 Plc 020 7214 4200
Chairman's Statement
Results
I am pleased to present the interim results for the six months to 31 March 2006
and to report that good progress has been made on all fronts. The Net Asset
Value (NAV) per share has risen to 100.7p from the initial starting value of
94.5p and, although it is still early days in the life of the Fund, the
investments made so far are generally performing well. At the period end, nine
qualifying investments had been made, of which seven are unquoted companies.
This reflects the Investment Manager's current view that better value can be
found in the unquoted marketplace and that many AIM flotations tend to be
overvalued. The main focus of the Fund's investment policy is on profitable
unquoted companies where it is possible to add value through leveraged finance
and initiatives such as "bolt-on" acquisitions.
The rise in the NAV in the period was due to increases in valuations of three
qualifying portfolio companies - Jelf, Gyro and Hill Station, and a good
performance from Electra Private Equity. The pipeline of potential new deals
remains healthy.
Dividends
The aim of the Fund is to distribute surplus income and capital profits in the
form of tax free dividends. In line with this policy, the Board has approved an
interim dividend of 1p per ordinary share, which will be paid on 4 August 2006
to shareholders on the Register of Members at the close of business on 7 July
2006. This dividend arises from part of the income surplus generated during the
period.
VCT Qualifying Status
Your Board continues to monitor the Company's VCT qualification status. I am
pleased to report that all of the required tests in the period were met.
New Accounting Policies
The Company complies with new UK financial reporting standards which are
reflected in these interim accounts for the first time. The most obvious change
is that your Company's portfolio is now valued at the bid price of each holding,
that is, the price at which shares can be sold. Until now, your Company has
followed valuation/accounting convention and used a mid market price. The
comparative historic figures in this report have been restated to reflect this
accounting change.
Share Buybacks
As set out in the Prospectus, the Company operates a share buyback scheme.
During the six-month period, a total of 12,089 of the Company's own shares were
acquired for cancellation at an average price of 87.5p per share. Shareholders
wishing to take advantage of the share buyback programme should contact the
investor helpline, maintained by Downing Corporate Finance, on 020 7411 4700.
March 2006 Budget
In March 2006, the Chancellor announced various changes to VCT legislation, most
of which affect new VCTs raised in the 2006/7 tax year and beyond.
Outlook
The economic climate provides a good platform for smaller companies, although
some areas of the stock market look overvalued. The portfolio is well
positioned, the pipeline of potential new investments is encouraging, and the
prospects for the Fund are good.
Rupert Pennant-Rea, Chairman
20 June 2006
Investment Manager's Review
At the period end the Fund comprised nine qualifying investments, two
investments in Electra Private Equity and Electra Active Management with the
balance of the Fund held in fixed interest deposit accounts. As new qualifying
investments are made the Fund will draw down on the cash deposits so that by the
end of the three year investment period the cash balance will be minimal. The
majority of the qualifying investments made to date are unquoted companies as we
find that the valuations are often more favourable and we can add more value
through financial leverage and corporate acquisitions. A key part of our
investment strategy is to add value through acquisitions and to do this we have
to ensure that the relevant management team are up to the task and are actively
supported by a good team of non executives.
Given that the Fund is still in the early stages of its investment period and
that unquoted investments tend to be held at cost within the first year, there
were few valuation changes in the portfolio. These included Hill Station, which
is an AIM listed company, whose shares rose sharply after we invested. In
addition we wrote up the carrying value of Gyro in response to strong trading.
The other valuation changes were Jelf, whose AIM price rose, and Electra Private
Equity which reported a significant valuation uplift.
New Investments
Hill Station
The company is a manufacturer of premium branded ice cream which competes
alongside Haagen-Dazs and Green & Black. In late 2005 the company sought funding
to acquire two significantly larger ice cream manufacturers, Granelli and
Loseley. The strategy was to integrate the three companies into one
manufacturing site, which would enable significant cost savings and synergies.
The company recently announced that this integration process was progressing
well and that it was on target to meet its forecasts. The Fund invested #758,085
alongside Electra Kingsway VCT for a combined equity stake of 16.0%.
Conquest Business Media
The company specialises in business-to-business publishing. Its core magazines
are The Manufacturer, The Manufacturer US and British Industry. The business was
founded in 1996 and is located in Norwich. The Fund invested #750,000 alongside
Electra Kingsway VCT for a 43.4% combined equity stake in the company.
Jelf Group
The company is an independent full service financial consultancy working
primarily with businesses. Jelf provides insurance, healthcare, financial
services and commercial financial solutions. In 2004 it floated on AIM in order
to achieve additional scale through acquisitions. In 2006, after reporting good
progress, the company sought to raise further monies to finance the acquisition
of a larger company. The Fund invested #250,160 alongside Electra Kingsway VCT
3 for a combined equity stake of 3.8%.
Portfolio Summary
(unaudited)
Qualifying Investments Cost at Valuation at % of Portfolio
31 March 2006 31 March 2006 by Value
%
# #
Hill Station 758,085 1,326,649 8.62
Find Portal 1,000,000 1,000,000 6.50
Amber Taverns 750,000 750,000 4.87
Ma Hubbards 750,000 750,000 4.87
Conquest Business Media 750,000 750,000 4.87
Gyro 375,000 657,960 4.27
Sanastro 600,000 600,000 3.90
Jelf Group 250,160 379,960 2.47
Keycom 296,000 176,000 1.14
5,529,245 6,390,569 41.51
Non Qualifying Investments
Electra Private Equity 3,550,253 4,974,200 32.31
Electra Active Management 4,000,000 4,029,479 26.18
7,550,253 9,003,679 58.49
13,079,498 15,394,248 100.00
Cash 19,739,824
Total 35,134,072
Income Statement
For the six months ended 31 For the period 20 August 2004 to For the period 20 August 2004 to
March 2006 31 March 2005 30 September 2005
(restated) (restated)
(unaudite (unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
# # # # # # # # #
Unrealised gains on - 1,323,967 1,323,967 - 152,673 152,673 - 990,783 990,783
investment
Income 520,456 - 520,456 38,782 - 38,782 557,765 - 557,765
520,456 1,323,967 1,844,423 38,782 152,673 191,455 557,765 990,783 1,548,548
Investment management (100,161) (300,273) (400,434) (21,399) (64,198) (85,597) (99,517) (298,551) (398,068)
fees
Other expenses (167,571) - (167,571) (129,170) - (129,170) (311,014) - (311,014)
Return on Ordinary 252,724 1,023,694 1,276,418 (111,787) 88,475 (23,312) 147,234 692,232 839,466
Activities before
Taxation
Tax on ordinary - - - - - - - - -
activities
Return on Ordinary 252,724 1,023,694 1,276,418 (111,787) 88,475 (23,312) 147,234 692,232 839,466
Activities after
Taxation
Return to Shareholders 0.74p 2.99p 3.73p (1.86)p 1.47p (0.39)p 0.80p 3.75p 4.55p
per Ordinary Share
The amounts dealt with in the Income Statement are all derived from continuing
activities.
No operations were acquired or discontinued in the period.
Reconciliation of Total Shareholders' Funds
For the six months ended 31 For the period 20 August 2004 to For the period 20 August 2004 to
March 2006 31 March 2005 30 September 2005
(restated) (restated)
(unaudited) (unaudited) (unaudited)
# # #
Total Return 1,276,418 (23,312) 839,466
Share issue expenses - (854,142) (1,880,960)
charged to Share
Premium account
Ordinary shares issued - 15,530,041 34,199,456
Preference shares - 50,000 -
issued
Repurchase of ordinary (10,579) - (12,437)
shares
Movements in Total 1,265,839 14,702,587 33,145,525
Shareholders' Funds
Total Shareholders' 33,145,525 - -
Funds at start of
period as restated
Total Shareholders' 34,411,364 14,702,587 33,145,525
Funds
Balance Sheet
As at 31 March 2006
(unaudited)
As at 31 March 2006 As at 31 March 2005 As at 30 September 2005
(restated) (restated)
(unaudited) (unaudited) (unaudited)
# # # # # #
Fixed Assets
Investments 15,394,248 6,417,514 11,755,624
Current Assets
Debtors and prepayments 45,165 87,403 79,910
Cash at bank 19,739,824 8,380,197 21,630,414
19,784,989 8,467,600 21,710,324
Current Liabilities
Creditors: amounts falling
due within one year
Other creditors 746,623 161,277 299,173
746,623 161,277 299,173
Net Current Assets 19,038,366 8,306,323 21,411,151
Total assets less current 34,432,614 14,723,837 33,166,775
liabilities
Creditors: amounts falling
due after more than one year
21,250 21,250 21,250
Net Assets 34,411,364 14,702,587 33,145,525
Capital and Reserves
Called-up share capital 341,728 205,300 341,849
Share premium 31,976,502 14,520,599 31,976,502
Capital redemption reserve 266 - 145
Realised capital losses (598,824) (64,198) (298,551)
Unrealised capital gains 2,314,750 152,673 990,783
Revenue reserve 376,942 (111,787) 134,797
Total Equity Shareholders' 34,411,364 14,702,587 33,145,525
Funds
Net Asset Value per Ordinary 100.70p 94.67p 96.96p
Share
As at 31 March As at 31 March As at 30 September
2006 2005 2005
Number of Ordinary Shares in 34,172,821 15,530,041 34,184,910
issue at end of period
Cash Flow Statement
For the six For the For the
months ended period 20 period 20
31 March August 2004 August 2004
2006 to 31 March to 30
2005 September
2005
(unaudited) (unaudited) (audited)
# # # # # #
Operating Activities
Investment income received 521,018 10,803 413,242
Bank deposit interest received 3,618 1,775 64,613
Investment management fees (391,849) - (228,000)
paid
Other cash payments (156,672) (53,489) (194,346)
Net Cash (Outflow)/Inflow from (23,885) (40,911) 55,509
Operating Activities
Investing Activities
Acquisition of investments (1,854,268) (6,264,841) (10,764,841)
Net Cash Outflow from (1,854,268) (6,264,841) (10,764,841)
Investing Activities
Cash Outflow before Financing
and Management of Liquid
Resources
(1,878,153) (6,305,752) (10,709,332)
Financing
Issue of ordinary shares - 15,529,841 34,199,456
Expenses of the issue of
ordinary shares
- (854,142) (1,880,960)
Repurchase of ordinary shares (12,437) - -
Issue of loan notes - 10,250 21,250
Net Cash (Outflow)/Inflow from (12,437) 14,685,949 32,339,746
Financing
(Decrease)/Increase in Cash (1,890,590) 8,380,197 21,630,414
for the Period
This information is provided by RNS
The company news service from the London Stock Exchange
END
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